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Calculation of ESI


ESI Calculation

ESIC or ESI is a self-contributing social safety and health insurance policy system.

ESIC Full form is Employee State Insurance Corportation. 

Establishments or non-seasonal manufacturing facilities with an overall number of employees of more than 10 (in some states, 20 employees) and also a maximum wage of ₹ 21,000.00 per month need to sign up with ESI. 

Note : Maximum wage limit for handicapped or disabled is ₹ 25,000.00

This short article covers the different wage additions and exclusions per the ESI Act and also ESI Calculation in information.

What Is The Contribution of ESI?

The ESI payment in respect of an employee comprises both the employer's contribution as well as the employee's contribution.

The contribution rates are repaired and are revised every so often.

As per the most recent policies outlined by ESIC, the employees get 0.75% subtracted from their respective gross salaries.

Whereas the companies make an ESI contribution of 3.25% of the employee's gross pay in the direction of ESI.

Thus, a total amount of 4% (employee + company = 0.75%+3.25%) is transferred as the ESI payment in the account of the employee.

Employee can withdraw in case of any type of clinical emergencies such as impairment, maternal, or joblessness to name a few.

Moreover, in case the daily ordinary wage of an employee depends on ₹ 137, they are exempt from the contribution payment. Nonetheless, companies need to pay their payment to such employees.

Applicability of ESI in Salary

For PAN India, the minimum personnel strength essential for ESI enrollment for makers is ten or more.

Depending upon the state, the need for businesses is 10 or 20.

The complying with table programs mentioned requires a minimum of 10 and also requires a minimum of 20 employees.

States in which a minimum of 20 employees are required to be registered for establishment

States in which a minimum of 10 employees are required to be registered for establishment

Andaman and Nicobar

Andhra Pradesh

Arunachal Pradesh






Dadra and Nagar Haveli


Daman and Diu




Himachal Pradesh


Jammu and Kashmir















West Bengal

Uttar Pradesh


Madhya Pradesh


Tamil Nadu


Salaries according to ESI Act

Not all bonuses, payments, as well as allowances made to employees, enter into their salaries.

Following is the listing of inclusions and exclusions under the wage component based on the ESI Act:


Complying with payments, allowances, and bonuses are part of earnings for computing the ESI contribution:

  • Suspension Allowance or Subsistence Allowance
  • Overtime Allowance
  • Wages Paid During Layoff
  • House Rent Allowance
  • Night Shift, Heat, Gas, and also Dust Allowance
  • Conveyance Allowance
  • Medical Allowance
  • Newspaper Allowance
  • Education Allowance
  • Drivers Allowance: Under particular problems
  • Food/Milk/Tiffin/ Lunch Allowance: It will not be dealt with as wage under particular problems.
  • Wages as well as Dearness Allowance for Unsubstituted Holidays
  • Interim Relief
  • Attendance Bonus
  • Expenditure on Annual/ Periodical Services Contract: Contribution is payable just on the quantity spent for periodical or yearly solution agreements.


Adhering to allocations, payments, and also perks are not part of salaries for calculating the ESI payment:

  • Washing Allowance
  • Annual Bonus
  • Incentive Bonus
  • Production Bonus
  • Inam/ Ex-Gratia Payment
  • Annual Commission
  • Service Charges
  • Gazetted Allowance
  • Exgratia Payment for Travel Expenses During Strike
  • Saving Scheme
  • Hamals/ Coolies Employed at a Particular Time: Outside the facility of the establishment, it is not considered as part of the wage. While, if the solution is provided inside the premise of the establishment, it will be thought-about part of the wage.
  • Expenditure on Servicing of Machines
  • Commission to Dealers/Agents
  • Service Contract
  • Payment made at the time of release on the basis of unused leave.
  • Commission on ad protected for Newspapers, otherwise paid to the regular employee
  • Fuel allowance/Petrol allowance
  • Entertainment allowance
  • Shoe allocation
  • Payment made therefore gratuity on discharge/retirement
  • Payment made after the leave was redeemed

Just How to Calculate ESI?

The ESI payments are based on the incomes paid to the employees. The company as well as employee contributions are as adheres to:

  • Employer's Contribution: 3.25% of the payable wages
  • Employee Contribution: 0.75% of the payable wages (effective July 1, 2019).

Total ESI Contribution = Employer's Contribution + Employees Contribution.

We have mentioned comprehend the ESI contribution estimation with an example.

Mr. Anil works in a factory/office that qualifies under the ESI Act.

The regular monthly wage for Mr. Anil is ₹ 16,000. The contribution in the direction of the Employee State Insurance Scheme is as adheres to:

  • Company Contribution = ₹ 16,000 * 3.25% = ₹ 520.00.
  • Employee Contribution = ₹ 15,000 * 0.75% = ₹ 120.00.
  • Complete ESI Contribution = ₹ 520.00 + 120.00 = ₹ 640.00.

Employee State Insurance Contribution Collection.

An employer is responsible for paying his payment for every employee and deducting employee payments from wages bills.

Additionally, the company has to pay the payments to the Corporation within 15 days of the last day of the scheduled month in which the payments are scheduled.

The Corporation has actually authorized certain State Bank of India branches as well as a few other banks to accept payments on its behalf.

Contribution Period and Benefit Period.

The contribution term is six months under the ESI scheme. Adhering to are the contribution durations and their corresponding benefit period:.

  • For the contribution period from 1st April to 30th September, the corresponding cash benefit period is 1st January of the following year to 30th June.
  • For the payment period from 1st October to 31st March of the list below year, the corresponding money advantage period is 1st July to 31st December.

The contribution duration idea advantages an employee whose salary increases beyond the threshold restriction.

The contributions till 30th September 2021 will be considered on the revised salary of INR 23,000 for ESI calculation purposes. After then, you won't be eligible for the ESI contribution.

Contribution Period as well as Benefit Period.

When salaries exceed the threshold of ₹ 21,000, the concept of payment duration covers the employee.

Let us proceed with the above example, state Mr. Anil was earning an income of ₹ 18,000 till June 2020.

The earnings increased to ₹ 22,000 from July 2021.

The payment duration is 1st April 2021—30th September 2021, and hence the deduction will certainly advance the modified salary up to September, as well as he will be eligible to get the ESI Medical and other facilities up to 30th June of the following year.

Likewise, state an employee, Mr. Sunil, gains a wage of ₹ 20,000 till October 2021, and also, from the following month (November 2021), he receives increased salary of ₹ 23,000.

The deduction should continue on the changed wage as much as March 31st, 2021, and he will certainly be eligible for the benefit as much as December 2021.

Salary Revision

Contri-bution Period

Benefit Period

July 2021

1st Apr 2021 – 30th

Sep 2021

1st Jan to Jun 2021



1st Oct 2021 to 31st  Mar 2022

1st Jul to 31st  Dec 2021

Both the employee and the employer are required to contribute to ESI, and the benefits help the employee in difficult situations.

What is the eligibility and applicability for ESI payment?

ESI applies to companies that have a staff of 10 or even more employees working full-time with them.

It is required for each working expert that makes less than ₹ 21,000 a month to get signed up under this scheme. 

The ones getting month-to-month earnings of more than this amount have an alternative to deciding whether to get the fund deducted or not.

Why do employees need ESI?

Working professionals registered under the ESI Act of 1948 are given full treatment at the time of incapacity to work.

Monetary support is offered to cover the loss sustained from absenteeism from work because of illness, maternal, special needs, or injury during work.

The plan likewise supplies clinical aid to the family members of the signed-up employees.

Apart from ESI, there are other employee benefits that every expert has to recognize.

How to get an ESI card?

The government's ESIC portal gives an alternative for registered employers to download and install the ESI or penchant application form online and also fill in the employee information.

The employee, after that, is required to do some necessary things like connect a family member's picture to the form as well as duly prove it.

After performing the relevant confirmations, the ESIC office issues an ESI card to the applicant or employee.

What is the Fine for late or non-payment of ESI?

For each and every day through which the contribution of ESI is delayed, the registered employer is charged a basic rate of interest of 12% per annum.

Non-payments, hold-ups, and fraud activities in ESI repayment might likewise bring about imprisonment for a period of up to 2 years and a penalty of ₹ 5,000. 

Additionally, the ITA (Income Tax Act) also disallows ESI contributions transferred after the stated day.

Employers do not obtain the deduction benefit of such contributions and end up paying revenue on it.

How To Claim ESIC Benefit?

One can get ESIC Form-9 to make a claim in case of Sickness/ Temporary Disablement/ Maternity Benefit as offered by the Employees' State Insurance Corporation, Ministry of Labour as well as Employment, Government of India.

There are two kinds of advantages that a person can claim as a beneficiary of the ESI scheme, as stated listed below:.

• Medical Benefits: 

The employee and his/her dependents can avail of medical care. To make use of this they need to go to any of the ESI empanelled hospitals.

• Cash Benefits: 

Employees or workers that are recipients of the ESI plan can get money benefits when it comes to sickness, disablement (temporary/permanent), pregnancy, joblessness, reliance, funeral costs, and vocational or physical rehabilitation.

What Is The ESI Number?

The ESI code number is a 17-digit number distinct ID offered to each of the beneficiaries of the system.

It is allocated to each of the factories/establishments registered under the provisions of the ESIC Act,1948.

One can generate this number with the ESIC portal on entry of the relevant information by the employer.

Can I Claim ESI In A Private Hospital?

Yes, you can claim benefits of ESI in a private hospital.

As mandated by the ESI Act, treatment needs to be taken just from the ESIC dispensaries or hospitals.

In case of emergency, if the treatment is taken from a private hospital, one can raise a claim with the ESIC subject to ESIC approval and only then the reimbursement of the expenses will be processed.

The ESIC has teamed up with a number of medical facilities in PAN India available on the ESIC online portal where one can assert the ESI quantity.

Returns Registration and Filing of ESI in wage.

Employers who are required to register under the Employee State Insurance Act of 1948 (" Act") must take the adhering to steps:.

  1. An employer needs to keep all documents accessible in case they are required.
  2. After that, an employer has to file Form 1, which is offered on the ESIC website in PDF format.

Keep in mind: 

ESIC will certainly double-check all of the details and also assign a 17-digit unique number.

All filings require this one-of-a-kind number.

Documents needed for enrollment of ESI in income.

Adhering to files is required for getting registration as ESI Member to obtain ESI income:.

  • Address proof of business.
  • PAN card of the business.
  • Details of all shareholders, directors, and partners.
  • A certificate under the Factories act or go shopping facility act.
  • Details of all employees as well as their wage structure.
  • Bank information.
  • Documents such as collaboration action, Articles of association, and Memorandum in case of firm.

The company can submit returns online when the establishment has been efficiently signed up.

The company has to comply with the steps laid out listed below to file ESI returns online:

  1. You'll have access to your login credentials once you've registered. The very same will certainly be required for declaring tax obligations online.
  2. Once the login qualifications are obtained, the employer must check out the main website ( to access the details.
  3. They might visit with the credentials as well as pick from a checklist of choices. Customize employee info, report a crash, etc 4. Prior to submitting the return, the employer has to ensure that all of the employee information is current.
  4. Afterwards, the employer needs to fill in the financial institution details and submit them to file the tax obligations.
  5. The company may then go to the 'List of Actions' as well as select 'Generate Challan.'.
  6. The challan needs to be downloaded and install and saved for future inspections and also recommendations.

ESI Salary Reports sent by Employer.

  1. Accident Report: A Notice of Accident in Form -12 need to be sent online within 24 hours to the appropriate Branch Office.
  2. Abstention verification record: It has to be provided to the Branch Office whenever the Branch Manager requests it in connection with any IP.
  3. Records of the key company, such as participation, salaries, and also account books and documents of the prompt company, as needed by the Labour Laws.

ESI Returns.

After the registration is finalized, the number of returns are filed annually?

ESI Returns should be submitted two times a year after enrollment. The following documents must be included with the returns:

  • Employees' Attendance Register, Form 6- Register of Wages and also track any type of accidents on the business's properties.
  • Returns and challans are due monthly.

Effects of Employee Contribution Non-Payment or Late Payment.

  • The amount deducted from an employee's pay is regarded as an employee contribution and belongs to the company. Therefore, the company bears a greater burden of guaranteeing that the payment is deposited with ESI in wage.
  • Non-payment or late settlement of the Employee's contribution gathered from the employee's salaries is a punishable offense under ESI Act.
  • Non-payments, late settlements, or fabricating settlements are punishable under the ESI Act by as much as 2 years in jail and a penalty of Rs 5,000.

Repercussion for Employer when ESI in Salary is Delayed.

If an employer falls short to contribute within the moment restriction established in the rule, they will certainly be subject to basic passion at the price of 12% each year for every day of hold-up or default in payment.

Final Verdict.

Employee State Insurance or ESI is a fund in which contributions are made by both the employer and also employees.

It is a system that helps to protect the employees in the event of unfortunate and uncertain events as it offers both cash money benefits addition to health care.

We really hope the write-up has actually provided you with the needed information pertaining to ESI in income, ESI calculation in Salary, the applicability of ESI, benefits of being an ESIC participant.

The return declare the ESI Member as well as the consequences of non-payment or late payment of the contribution.

Frequently Asked Questions.

Q: What will be the repercussions of delayed or non-payment repayment for the employee?

Ans: Non-payment or late settlements are punishable offenses under the ESI Act and also can result in up to 2 years behind bars and also a fine of as much as Rs 5,000.

Q: What is the fine for the postponed settlement to the fund by the Employer?

Ans: If a company fails to add within the time restriction developed in the rule, it will certainly be subject to straightforward passion at the rate of 12% annually for each and every day of delay or default in a settlement.

Q: What is the ESI complete form in income?

Ans: The ESI in salary stands for Employee State Insurance.

Q: What is the minimum variety of employees for which an ESI Registration is called?

Ans: In some states, a minimum of 10 employees and also 20 employees need to be there for ESI Registration. The full list has been given in the short article above.

Q: How numerous ESI returns are filed in a year?

Ans: 2 returns of ESI are filed yearly.

Q: How is an employee's ESI deducted from their monthly salary?

Ans: Employees have 0.75% of their gross income removed each month, while employers add 3.25% of the employee's gross pay monthly to ESI.

Q: Who is eligible for the ESI plan?

Ans: ESI relates to all employees whose month-to-month commission, omitting overtime, incentives, and leave encashment, does not surpass Rs.21,000 each month. When it comes to a person with a disability, it is Rs. 25000.

Q: What is the age restriction for applying for ESI?

Ans: Candidates applying for ESI need to be between 18-27 years old.

Q: What is the limit of ESI in wages?

Ans: ESI relates to all employees whose month-to-month compensation, excluding overtime, incentives, as well as leave encashment, does not exceed Rs 21,000 each month. When it comes to a person with a handicap, it is Rs 25000.

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